SAP leaves Microsoft trailing in hosted ERP race

SAP is stepping into uncharted waters with the launch of its hosted business applications service.

James Niccolai, IDG News Service
September 19, 2007

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SAP is stepping into uncharted waters with the launch of its hosted business applications service.

The move will give it a head start over Microsoft and other rivals, but could also mean SAP learns the hard way that offering hosted ERP on a wide scale is difficult to do.

Offering business applications on demand, also called software as a service, is not new. But most services, including those from trailblazer Salesforce.com, have focused on customer relationship management or human resources management, only a part of ERP.

Those functions are easier to offer as a hosted service, since managing sales and payroll tends to be fairly standard across industries and countries. ERP as a whole is more complex, involving tasks like supply chain management, procurement and accounting, for which requirements and regulations can vary greatly.

"It's less standard across industries, but even more importantly across geographies. The regulatory differences are profound even between the Netherlands, Belgium and Luxembourg," said Bo Lykkegaard, a research manager with IDC in Denmark.

Even the existing leader in hosted ERP, NetSuite, has found it difficult to offer the services widely outside the US, according to Lykkegaard. "They've been selling mostly CRM internationally, which is easier to localise because it's mostly a question of currency and sales tax."

"Hosted ERP is still nascent, and that's what A1S is largely about. That's what makes the A1S launch today so interesting," he said.

SAP executives are giving the first public demonstration of A1S, aimed at mid-market companies with up to about 2,000 employees, in New York on Wednesday. They are also expected to unveil the name for the service and possibly pricing. The software is being tested by a handful of customers now and is likely to be rolled out gradually next year starting in the US and parts of Europe.